The Gym Group PLC (LSE:GYM) shares rose 2.5% to 165.8p after RBC Capital Markets upgraded the stock to Outperform and lifted its price target, arguing that revenue-driven profit growth is now coming into clearer view.
RBC raised its target price to 200p from 155p and increased its forecasts after reviewing the group’s recent trading update. The broker said slower adoption of cheaper off-peak memberships is easing pressure on pricing and opening the door to stronger like-for-like revenue growth.
Off-peak memberships, which are about 30% cheaper than standard plans, had been growing rapidly and diluting average revenue per member. RBC said that trend is now starting to mature.
Off-peak penetration reached about 14% of the membership base in the last financial year, with growth slowing. That, in turn, allows higher price rises to be pushed through on standard and premium tiers.
RBC lifted its like-for-like growth assumptions for 2026 and 2027 and upgraded adjusted earnings before interest, tax, depreciation and amortisation forecasts by close to 10%.
The broker said this kind of revenue-led upgrade is higher quality than gains driven by temporary cost savings.
There are still risks. Membership volumes in the mature estate have been broadly flat, and competition remains intense. However, RBC pointed to potential upside from new gym formats and partnerships that could help attract additional members.
The broker was also encouraged by the company’s faster rollout plans and a new capital allocation policy, including a £10 million share buyback funded by debt.
At current levels, RBC believes the shares do not fully reflect improving pricing power and upgraded earnings momentum.